Solar installers are emerging from a recent slump with some high-profile projects that signal a local turnaround in the commercial market.

Several projects — from a 3.5-megawatt system for rocket-engine maker Aerojet in Rancho Cordova to a much-smaller 206-kilowatt project for a Kohl’s store on Arden Way — are creating attention and generating revenue for solar companies. It’s an about-face from just a few months ago, when many solar companies were struggling in both the residential and commercial markets.

The Roseville-based company is building the Aerojet project, one of the largest in the nation and the backdrop for a recent speech on renewable energy by Gov. Arnold Schwarzenegger.

Aerojet’s project is one of several planned in the region.

San Luis Obispo-based REC Solar Inc. is installing two 600-kilowatt systems for Costco warehouses in Citrus Heights and Folsom, which should be completed by Thanksgiving. Retail chain Kohl’s opened three stores in the region Wednesday, including one on Arden Way with a solar-panel system that will supply half of the store’s energy.

And Siemens Transportation Systems began getting power from a 1-megawatt solar system at its south Sacramento plant late last year. The light-rail manufacturer has plans for a second 1-megawatt system by March, said Christopher Halleus, vice president and controller of rolling stock for Siemens.

Each megawatt of solar could power about 150 to 200 households.

Attractive tax incentives and the desire to reduce energy costs and be environmentally friendly have encouraged more companies to make the switch. Of course, the credit crunch — still a critical problem — makes financing projects difficult, though not impossible.

Despite the financial hurdle, commercial solar-panel systems likely will outpace residential systems, which were the boon for the industry until the recession started, said Gopan Madathil, founder and president of TechCoire, a local networking organization.

“The commercial side, in six to 12 months, is where I see most of the action,” he said.

Some dim days dominated the industry last year. But legislation “breathed new life back into the solar industry,” said Rhone Resch, president of the Solar Energy Industries Association.

Solar installations will increase about 75 percent this year, after an 82 percent gain in 2008, Resch said.

“What is exciting for us is companies like Costco are increasingly going for solar,” said Angiolo Laviziano, president and CEO of REC Solar. The company has a 20-employee office in Sacramento.

Here come the funds...

Finding loans for commercial projects has been a major problem, industry leaders say. But long-term power purchase agreements — basically contracts between independent power producers and power purchasers — allow companies such as Siemens to avoid paying big money up front for large-scale solar systems.

Instead, third-party companies take on the risk.

In Siemens’ case, it was Oakbrook, Ill.-based Perpetual Energy Systems LLC, which specializes in the finance and ownership of large-scale solar-powered energy systems.

Fotowatio Renewable Ventures of San Francisco played a key role in introducing the concept of third-party financing and power purchase agreements to the industry in early 2001, company CEO Matt Cheney said.

“We predicted that it would pick up and it has,” Cheney said. “It’s definitely the norm now.”

FRV has financed several prominent systems, including one for The Gap distribution center in Fresno, a 2-megawatt system at Denver International Airport and the nation’s largest photovoltaic project, a 14-megawatt system at Nellis Air Force Base near Las Vegas.

Last year, power purchase agreements were used to fund 75 percent of commercial solar-panel installations nationwide, Resch said.

That’s partially because many banks are hesitant to fund solar-panel projects, and will impose higher fees and shorter-term loans, a major problem for a 20-year solar project, Cheney said.

“So, subsequently, we’re looking to life (insurance) companies,” he said, citing John Hancock as an example. “Life insurance companies tend to have a longer-term outlook in how they go about investing in companies.”

Federal tax credits coupled with state and utility rebates also have helped the industry. The Solar Energy Industry Association lobbied the federal government to turn the 30 percent tax credit into a grant program for commercial projects, especially after bank investments slowed.

As a result, a portion of the federal stimulus bill now allows commercial solar-system owners to apply for a 30 percent tax credit or grant, Resch said.

More lenders coupled with tax credits have pushed banks to reconsider loans for systems.

Taking off

The declining cost for solar panels has also helped generate interest — and revenue. In the past five years the cost per watt has dropped to about $2.50 from about $4, according to the Solar Energy Industries Association.

Solar finally “penciled out” for Aerojet, the aerospace and defense unit of GenCorp Inc. (NYSE: GY). Aerojet partnered with the Sacramento Municipal Utility District and Solar Power to build its 3.5-megawatt project that was a year and a half in the making.

Solar Power is paying for the construction, and will operate and maintain the 25-acre facility. But Solar Tax Partners I of San Francisco will own the system.

Ron Samborsky, Aerojet vice president of renewable energy and sustainability, said Aerojet plans to collaborate on research with SMUD and Solar Power to increase renewable-energy storage and improve operations.

“We’re in the discussion phase,” he said of talks with SMUD and Solar Power.

Similar to Aerojet, Kohl’s embraces a power purchase agreement model, working with Beltsville, Md.-based SunEdison to finance its projects.

“Certainly in California there are rebates and incentives,” said Ken Bonning, executive vice president of logistics and store planning for Kohl’s. “It really makes sense for us to participate (in a solar program).”